TAXATION: HOW TO PREVENT TAX EVASION IN BANKS

OF STA.CRUZ, LAGUNA

A research submitted to partial fulfillment of the requirements for the

Accountancy Business and Management Strand in the Senior High

School Department

AMA Computer College Santa Cruz Campus

Ciar, Kyle Jero B.

Cruz, Carmelita Isabel D.

Grona, Louise Janica R.

February 2019

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 DEDICATION

The researcher wants to dedicated this research paper to the people who

supported him from the beginning up until now:

To his mommy, Mrs. Maricel Ciar who kind heartedly gave him support to

finish this research paper.

To Ms. Louise Janica R. Grona, and Ms. Carmelita Isabel Cruz, his fellow

friends also his groupmates who sacrifices a lot of effort to finish this work.

And lastly, to Almighty God.

K. J. B. C.

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 DEDICATION

The researcher wants to dedicate this research paper to the people who

helped and encouraged her:

First, to God Almighty.

To her parents, Mr. Rodolfo Cruz and Mrs. Catherine Cruz and other

members of the family for the support and unconditional love.

To the encouragement of Ms. Louise Janica Grona and Mr. Kyle Jero

Ciar, her fellow groupmates and friends.

And lastly to all the teachers for building her courage to complete the task

C. I. D. C.

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 DEDICATION

The researcher dedicates this work to the people who became her inspiration

for accomplishing this research paper:

First and foremost, to Almighty God who gave her the blessings to complete

this research paper.

To her loving and supportive parents, Mrs. Arsenia Grona and Mr. Gerry

Grona

To her brother Mr. Cyrus Jacob Grona and other members of the family for

the unconditional love.

To her Research for Daily Life professor, Mr. Bernard Articona and all the

staffs of AMA Computer College Sta. Cruz Campus.

To her fellow friends and groupmates, Ms. Carmelita Isabel Cruz , and Mr.

Kyle Jero Ciar, who helped to finish the task.

L. J. R. G.

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 ACKNOWLEDGEMENT

The success and final outcome of this project required a lot of guidance

and assistance from many people and I am extremely privileged to have got

this all along the completion of my project. All that I have done is only due to

such supervision and assistance and I would not forget to thank them.

I respect and thank Mr. Bernard Articona for providing us an

opportunity to do the project work and giving us all support and guidance which

made us complete the project duly. We are extremely thankful to him for

providing such a nice support and guidance, although he had busy schedule

managing the corporate affairs.

K. J. B. C.

C. I. D. C.

L. J. R. G.

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 CHAPTER 1

Introduction

Having a business or company is not that easy. You will definitely

experience a roller coaster ride because of its different activities and its

ventures that will help you in providing more ideas, innovations and

inspirations. You may have encounter different kind of issues that will

test your capability, ability, and your focus in your goals, vision and

mission. And from that, you will be came up at some point of your

business career, that you are deciding to give up what you started, leave

the business world and stood silently in life.

This research paper focuses on taxation, and how to prevent the

that so called tax evasion in banks of Sta.Cruz, Laguna that will give

them a headache in the near future if they can't handle it accordingly.

This research paper will also explain the importance of taxation

and its relavance to our economy and most importantly for the people

living in Sta. Cruz area.

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Background of the Study

A tax (from the Latin taxo) is a mandatory financial charge or some

other type of levy imposed upon a taxpayer (an individual or other legal entity)

by a governmental organization in order to fund various public expenditures.

A failure to pay, along with evasion of or resistance to taxation, is punishable

by law. Taxes consist of direct or indirect taxes and may be paid in money or

as its labour equivalent. Most countries have a tax system in place to pay for

public/common/agreed national needs and government functions: some levy

a flat percentage rate of taxation on personal annual income, some on a scale

based on annual income amounts, and some countries impose almost no

taxation at all, or a very low tax rate for a certain area of taxation. Some

countries charge a tax both on corporate income and dividends; this is often

referred to as double taxation as the individual shareholder(s) receiving this

payment from the company will also be levied some tax on that personal

income.

Tax evasion is the illegal evasion of taxes by individuals, corporations,

and trusts. Tax evasion often entails taxpayers deliberately misrepresenting

the true state of their affairs to the tax authorities to reduce their tax liability

and includes dishonest tax reporting, such as declaring less income, profits or

gains than the amounts actually earned, or overstating deductions. Tax

evasion is an activity commonly associated with the informal economy. One

measure of the extent of tax evasion (the "tax gap") is the amount of

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unreported income, which is the difference between the amount of income

that should be reported to the tax authorities and the actual amount reported.

In contrast, tax avoidance is the legal use of tax laws to reduce one's tax

burden. Both tax evasion and avoidance can be viewed as forms of tax

noncompliance, as they describe a range of activities that intend to subvert a

state's tax system, although such classification of tax avoidance is not

indisputable, given that avoidance is lawful, within self-creating systems.

Statement of the Problem

The purpose of the study is to understand the factors affecting tax

evasion and explain briefly the ways on how to prevent the said problem in

banks of Sta. Cruz, Laguna. It also seeks to provide an explanation of what is

the background of the research.

Eventually, this could help you to understand our topic:

 What are the various factors that shaped the tax evasion in banks of Sta.

Cruz, Laguna?

 What is the relationship between the variables and the taxation?

 What are the strategies can help to avoid tax evasion?

Objectives of the Study

The following are objective of the study:

1. Elaborate and have a better understanding about taxation and tax

evasion.

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2. Understand the relevance of taxation in society.

3. Learn on how to prevent tax evasion.

4. Develop a widespread knowledge and raised awareness in this kind of

matter not only in the business world, but in general.

Significance of the Study

The significance of the study is primarily concern on giving a concrete

information on how to handle the mentioned issue and give a hint of preventing

this problem. It will also show the concept of taxation and its purpose or how

beneficial it is in our society, in creating jobs and other possible opportunities.

This is very helpful for the management for a better planning and

identifying the strengths,weaknesses,opportunities and threats.

Since that banking that and finance is a big responsibility to take, better

accounting strategies are required for this kind of business, so that the

researcher's provide a simple study.

Scope and Limitation of Study

This study will focus on ways on how to prevent tax evasion and

understand taxation. Since personal income taxation is a very sensitive

matter, people generally were reluctant to disclose information related to their

savings, investments and planning measures adopted for period under the

study.

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Hypotheses

Based on the problem identified and the objectives set, the following

hypotheses were formulated.

1. The main cause of tax evasion is a poor accounting and managerial

strategies.

2. Slow economic progression will be seen.

3. Due to the incidences of tax evasion, the government nastily uses higher tax

rates to achieve a given revenue target.

4. Tax evasion will be familiar of everyone who reads this study.

5. Tax evasion will be a main factor of possible downfall of banking and finance

business in Sta. Cruz , Laguna.

6. The banks of Sta. Cruz, Laguna will become free in tax evasion after

reading this

7. The leader of the boards can formulate better the strategies for tax

avoidance.

Conceptual Framework

Below is the representation of a research paradigm of the study. The

conceptual framework derived from this study illustrate and show information

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on how the research project is completed. The independent variable of the

study comprises the main problem and dependent variable contains the

strategies and factors which regards to the prevention of tax evasion in bank of

Sta. Cruz, Laguna.

Below is the representation of a research paradigm of the study. The

conceptual framework derived from this study illustrate and show information

on how the research project is completed. The independent variable of the

study comprises the main problem and dependent variable contains the

indicators which is the sari-sari store, food cart businesses and dry foods

businesses which regards to the coping mechanisms of small businesses in

Santa Cruz Laguna in 2018.

INDEPENDENT VARIABLE DEPENDENT VARIABLE

HOW TO PREVENT TAX

EVASION IN BANKS OF STA.
CRUZ LAGUNA
TAXATION
 Strategies
 Factors

Theoretical Framework

The economists have put forward many theories or principles of

taxation at different times to guide the state as to how justice or equity in

taxation can be achieved. The main theories or principles in brief, are:

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 Benefit Theory: According to this theory, the state should levy taxes on

individuals according to the benefit conferred on them. The more benefits a

person derives from the activities of the state, the more he should pay to the

government. This principle has been subjected to severe criticism on the

following grounds: Firstly, If the state maintains a certain connection between

the benefits conferred and the benefits derived. It will be against the basic

principle of the tax. A tax, as we know, is compulsory contribution made to the

public authorities to meet the expenses of the government and the provisions

of general benefit. There is no direct quid pro quo in the case of a tax.

Secondly, most of the expenditure incurred by the slate is for the general

benefit of its citizens, It is not possible to estimate the benefit enjoyed by a

particular individual every year. Thirdly, if we apply this principle in practice,

then the poor will have to pay the heaviest taxes, because they benefit more

from the services of the state. If we get more from the poor by way of taxes, it

is against the principle of justice?

Ability to Pay Theory: The most popular and commonly accepted principle of

equity or justice in taxation is that citizens of a country should pay taxes to the

government in accordance with their ability to pay. It appears very reasonable

and just that taxes should be levied on the basis of the taxable capacity of an

individual. For instance, if the taxable capacity of a person A is greater than

the person B, the former should be asked to pay more taxes than the latter. It

seems that if the taxes are levied on this principle as stated above, then

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justice can be achieved. But our difficulties do not end here. The fact is that

when we put this theory in practice, our difficulties actually begin. The trouble

arises with the definition of ability to pay. The economists are not unanimous

as to what should be the exact measure of a person's ability or faculty to pay.

The main view points advanced in this connection are as follows: (a)

Ownership of Property: Some economists are of the opinion that ownership of

the property is a very good basis of measuring one's ability to pay. This idea

is out rightly rejected on the ground that if a persons earns a large income but

does not spend on buying any property, he will then escape taxation. On the

other hand, another person earning income buys property, he will be

subjected to taxation. Is this not absurd and unjustifiable that a person,

earning large income is exempted from taxes and another person with small

income is taxed? (b) Tax on the Basis of Expenditure: It is also asserted by

some economists that the ability or faculty to pay tax should be judged by the

expenditure which a person incurs. The greater the expenditure, the higher

should be the tax and vice versa. The viewpoint is unsound and unfair in

every respect. A person having a large family to support has to spend more

than a person having a small family. If we make expenditure. as the test of

one's ability to pay, the former person who is already burdened with many

dependents will have to' pay more taxes than the latter who has a small

family. So this is unjustifiable. (c) Income as the Basics: Most of the

economists are of the opinion that income should be the basis of measuring a

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man's ability to pay. It appears very just and fair that if the income of a person

is greater than that of another, the former should be asked to pay more

towards the support of the government than the latter. That is why in the

modern tax system of the countries of the world, income has been accepted

as the best test for measuring the ability to pay of a person.

Definition of Terms

Taxation

-Taxation is the practice of collecting taxes (money) from citizens based on

their earnings and property.

Tax Evasion

 is the illegal evasion of taxes by individuals, corporations, and trusts.

Tax evasion often entails taxpayers deliberately misrepresenting the

true state of their affairs to the tax authorities to reduce their tax liability

and includes dishonest tax reporting, such as declaring less income,

profits or gains than the amounts actually earned, or overstating

deductions.

Economist

 An economist is an expert who studies the relationship between a

society's resources and its production or output

Expenditure

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 Payment of cash or cash-equivalent for goods or services, or a charge

against available funds in settlement of an obligation as evidenced by

an invoice, receipt, voucher, or other such document. See also

revenue expenditure, capital expenditure.

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 CHAPTER 2

Review of Related Literature

These are the related literature reviewed by the researchers that help as

to conceptualize and to improve the research program:

 According to Business Dictionary, taxation is a means by which

governments finance their expenditure by imposing charges on citizens

and corporate entities. Governments use taxation to encourage or

discourage certain economic decisions. For example, reduction in

taxable personal (or household) income by the amount paid

as interest on home mortgage loans results in

greater construction activity, and generates more jobs.

 According to Investopedia, taxation applies to all different types of

levies. These can include (but are not limited to):

 Income tax: Governments impose income taxes on financial income

generated by all entities within their jurisdiction, including individuals

and businesses.

 Corporate tax: This type of tax is imposed on the profit of a business.

 Capital gains: A tax on capital gains is imposed on any capital gains

or profits made by people or businesses from the sale of certain assets

including stocks, bonds, or real estate.

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 Property tax: A property tax is asses by a local government and paid

for by the owner of a property. This tax is calculated based on the

property and land values.

 Inheritance: A type of tax levied on individuals who inherit the estate

of a deceased person.

 Sales tax: A consumption tax imposed by a government on the sale of

goods and services. This can take the form of a value-added tax

(VAT), a goods and services tax (GST), a state or provincial sales tax

or an excise tax.

 As stated by thebalancesmb, the best way to avoid being charged

with tax evasion is to know the tax laws for income taxes and

employment taxes. For example, knowing what deductions are legal

and the recordkeeping requirements for deductions is a big factor in

avoiding an audit. For employers, knowing the payroll tax reporting and

payment requirements will help keep you out of trouble.

 Tax allowances and excise duties were increased in line with inflation as

defined by the Oxford Dictionaries.

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 CHAPTER 3

Research Methodology

This chapter presents the Research design of the study, respondents or

the study, sampling technique, Research instrument, Research procedures

and statistical treatment of the study.

Research Design

This study used the descriptive method of research to determine the

factors of tax evasion of banks in Sta. Cruz Laguna and it's significance.

GutCheckit.com (2018) The purpose of descriptive research is, of

course, to describe, as well as explain, or validate some sort of hypothesis or

subjective when it comes to specific group of people.

Respondents of the Study

The primary sources of data utilized in this study were every banks in

Sta. Cruz, Laguna. It is composed of different banks around Sta. Cruz. The

respondents were chosen because of the researcher to gives the character that

was given.

Sampling Technique

Purposive sampling was employed to select every banks as the

researcher’s subject based on their promotional strategy.

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 Purposive sampling who also called Judgemental sampling was one that

selected based on the characteristics of population. The researcher chooses

this because she believes that the respondents have the characteristics that

she has been looking for.

Research Instrument

This study used rubrics in gathering data. It is the set of standard used

to evaluate information. The rubrics had a total of five items standards each to

be evaluated as follows:

Rating Scale Interpretation

5 4.25-5.00 Outstanding

4 3.50-4.24 Very Satisfactory

3 2.75-3.49 Satisfactory

2 2.00-2.74 Less Satisfactory

1 1.20-1.99 Poor

Table 1: Lickert Scale

Research Procedure

For the assurance of hundred percent responses, the research formally

approached every banks in Sta. Cruz, Laguna through letter and asked them

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to be used as the actual respondents of the study. When everything is settled,

the study presented and studied. The data gather from the responses of every

banks were tallied and analyze.

Statistical Treatment

The following statistical treatments are used in computing the data

gathered.

A weighted mean is a kind of average. Instead of each data point

contributing equally to the final mean, some data points contribute more

“weight” than others.

Standard Deviation is a measure that is used to quantify the amount of

variation or dispersion of a set of data values.

T-test is most commonly applied when the test statistic would follow a

normal distribution if the value of a scaling term in the test statistics were

known. When the scaling term is unknown and is replaced by an estimate

based on the data, the test statistics (under certain conditions) follow a

student’s t distribution. The t-test can be used, for example, to determine if two

sets of data are significantly different from each other.

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